2018-08-11

PBoC and CBIRC Will Ensure the Credit Flows

China’s banking and insurance regulator said it will facilitate the transmission of monetary policy by supporting more lending by financial institutions.

The China Banking and Insurance Regulatory Commission said in a statement posted on its website that it would guide financial institutions to expand financing, including to qualified private companies and small businesses. It would encourage them to balance the promotion of economic growth with controlling risks.

...The regulator took special note of loans for infrastructure projects. In July, preliminary statistics indicated that new infrastructure loans were 172.4 billion yuan, an increase of 46.9 billion yuan over the month before, it said.

More infrastructure investment. An implicit government guarantee on loans to SMEs. Tan Yaling explained how this will end six years ago:

Recently, an article pointed out that China's foreign exchange reserves of more than 3 trillion US dollars cannot provide shelter for the Chinese economy. In the future, if China can only continue to promote investment and there is no other way to maintain economic growth, then China’s foreign exchange reserves will be exhausted within five years.

With six years of rapid credit expansion and still no major reform, China's FX reserves would be exhausted in 12 to 18 months if capital controls failed.